The market found support today in the range we were looking for.
Now where do we go from here?
It’s anyone’s guess, but we have one reading that kicked in today that could provide a clue.
According to Larry Williams, the Dow is now as oversold as it’s been in the last 80 years — including the 1929-1932 bear market.
William’s proprietary indicator has occurred at or near a number of bottoms over the years, including three in the 2000-2002 bear market, 1998, 1990, 1987 and 1974. At other times, the indicator has triggered at points that were close to the bottom in price but not in time, such as September 1981 and late 1937. Only twice was it wrong — it was too early in August 1969 and January 1974 — but even then stocks bounced modestly for two to three months before resuming their downtrend.
Based on the history of the indicator, a rally or basing period would appear to be likely soon.
And one other piece of supporting evidence: more than half of all NYSE stocks hit 52-week lows this week, something that has occurred only a handful of times in the last 71 years: near the 1987, 1970, 1962, 1940, 1938 and 1937 lows.
Now all we need are buyers.
Paul Shread is a Chartered Market Technician (CMT) and member of the Market Technicians Association.